Friday March 9 2007 06:57 IST
Karnataka must now peg levies at 5%
It should be a matter of welcome relief to the Karnataka Government that two key amendments it brought about to its Stamp Act in 1999 have been upheld by the High Court. The amendments – Section 45(a) and Section 45(b) – provided for collection of stamp duty based on a guidance value of the property for the purposes of its registration, and non-registration of a property, if the stamp duty paid is below the guidance value, till its appropriate duty is determined. The government took to the concept of guidance value so as to ensure that the true market value of a property is not suppressed and stamp duty evaded. The guidance value is meant to serve as a Bible to registration authorities, reflecting the market worth of the property at that period of time. It is revised from time to time and generally varies from one area to another depending on the importance of the place or the status of its development. Before then Revenue Minister B. Somashekhar initiated these amendments, property dealers and sub-registrars colluded with each other to under-report the value of transactions and deny the government its legitimate share of revenue. The amendments worked like a magic and cut down the huge pile of under-valuation cases – from 67 percent of all registered documents to 2 percent now.
It is a matter of concern that Karnataka has not initiated any meaningful reform measures in property space since then. In the last seven years or so, the demand for industrial, commercial and residential real estate in Bangalore, Mysore and Mangalore and other booming towns has picked up. It is an accepted wisdom that low levies increase transactions, but many property in Bangalore repels any rational buyer with their irrational costs. This is mainly because of exorbitant stamp duties of well above 8 percent, which when repeatedly loaded into a transaction, makes the property too expensive for buyers. It is precisely for this reason that Union Urban Development Minister S. Jaipal Reddy has repeatedly urged Karnataka to reduce its stamp duty to at least 5 percent and facilitate faster transfers of land ownership. This bold move, the JD(S)-BJP coalition regime must realise, will only push up revenues.